Westpac rejects polluters

Westpac Banking Corp
has become the first major bank to declare it will steer clear of financing emissions-intensive projects as the federal government pushes ahead with plans to introduce a carbon price.

In a sustainability report yesterday, the bank said it had a policy of “avoiding involvement in transactions which support the establishment or long-term continuation of inefficient and high carbon-emitting assets into the future".

The statement backs the view expressed last week by NSW Independent Pricing and Regulatory Tribunal chairman Rod Sims, who said it would be difficult to build coal-fired power plants in future.

But the Westpac report, based on an energy policy that it finalised in September, is the first explicit statement from a major Australian bank that it will not finance such projects and follows Westpac’s previous support for market-based approaches to emissions reduction.

In a sign of sensitivity over financing high-emissions projects, Western Australia’s biggest coal-fired power producer, Verve Energy, revealed last week that it only secured funding for a $150 million project on the condition that it not name the bank, which was worried about its reputation.

Westpac’s statement came as the government announced a Productivity Commission study of international action on carbon pricing and as a parliamentary library research paper charted growth in global ­carbon markets. “Emissions trading is not dead. Nor is it sleeping. That it has slipped from the Australian policy spotlight does not mean that the rest of the world takes the same attitude," says the report by the library’s economics ­section.

It found that the volume and value of greenhouse gas permits traded globally had roughly doubled in each year since 2005, until growth in the value of the market slowed when permit prices dropped during the economic downturn in 2009.

The library report cited World Bank research showing that 8700 million tonnes of carbon dioxide equivalents were traded in 2009, worth $US143 billion.

“Every policy to reduce carbon pollution puts an effective price on carbon, even if that price isn’t immediately obvious," he said.

“Countries around the world are taking action to reduce carbon pollution and an open trading nation like Australia can’t afford to be left behind Australia needs to get started on introducing a carbon price to our economy.’’

Labor promised the PC study as part of its post-election agreement with independent MP
Tony Windsor
.

It will determine the effective carbon price on the electricity generation, manufacturing and transport sectors in the United Kingdom, the United States, Germany, New Zealand, China, India, Japan and South Korea, reporting by the end of May.

A similar study by Vivid Economics, commissioned by the Climate Institute, reported last month that China had an effective carbon price eight times higher than Australia’s, and the price in the US was three times higher than in Australia.

The PC study was welcomed by the Greens, but Coalition climate action spokesman
Greg Hunt
said it must not be used to justify the importing of an emissions trading scheme or carbon tax and should take a “warts and all" look at government policies such as the bungled green loans and insulation schemes.

In April, the government shelved its emissions trading scheme, which had twice been rejected by the Senate. But since the election it has renewed its pledge to pursue a carbon price, and is working on options through a multi-party climate change committee, involving Labor, the Greens and independent MPs.

The director of Economics at the Australian Chamber of Commerce and Industry, Greg Evans, said the PC would provide much-needed rigour in the debate, but the terms of reference should not be just geared to building a case for quick action on carbon pricing.

“The relative impact on our economy of a carbon pricing is likely to be much greater than in any other advanced economy. This is because our economy is much more trade exposed and secondly our existing level of fossil fuel use in energy production is also comparatively high," he said.

The parliamentary library’s report, Greenhouse Gas Emissions; still trading after all these years, says that, globally, there is a “bottom-up" approach to emissions trading, with countries developing their own schemes, rather than striking a global deal.

“It may be messy and inconsistent by these developments hold out the possibility that global emissions trading will occur by default, rather than by any grand international bargain," it says.